Category Archives: Discovery

April 10, 2014

Top 3 Tips for Preserving Documents When Facing Employment Litigation

By Scott E. Randolph 

If an employee or former employee has sued or threatened to sue your company alleging an employment claim, one of the first things you need to do is initiate steps to preserve all documents that potentially may be relevant to the dispute.  Your preservation obligation includes not only paper copies of documents and communications but also electronic and archived information even if it resides on mobile devices, on an employee’s off-site computer, in remote server farms, or in the cloud.  If you destroy relevant documents or electronic information while involved in litigation, courts may sanction you for “spoliation.” In particular, your judge may throw out all or part of your case and impose monetary sanctions for failing to take appropriate measures to preserve and maintain potentially relevant written and electronic communications and documents.  

To meet your document preservation obligations and help reduce the risk of adverse rulings and sanctions imposed in court, follow our top three tips for preserving relevant documents. 

Tip #1 – Identify Who May Have Relevant Data 

Identify any individuals who work with or service your company who may have data relevant to the dispute.  Consider not only your direct employees, but also any consultants, independent contractors, recruiters, agents and other persons who may have emails, texts, letters, files, evaluations or other information that may be relevant to the dispute or employment issues in question.  

Tip #2 – Instruct Identified Persons Not to Destroy, Modify or Forward Data 

After identifying who may have relevant data, you need to instruct all stakeholders in the dispute, including all persons identified above, of their obligation to preserve all potentially relevant information.  Send a “litigation hold” memo that informs these individuals to save hard copies as well as electronic versions of relevant information.  Explain that the obligation to preserve this data extends to information on remote computers and mobile devices.  Explicitly instruct folks not to change or forward information to others as that may change the data or result in inadvertent destruction.  Inform them to be careful not to use any computer programs that would sweep or erase their electronic data.  Keep this “litigation hold” in place for the duration of the dispute, including any appeal. 

Tip #3 – Stop Destruction Procedures 

Companies typically have routine document and electronic information destruction procedures.  Once you “anticipate” litigation, you need to stop all regular destruction procedures so that relevant information is not destroyed through the normal course of business.  Talk to your internal IT team to stop normal document destruction procedures and to retain all relevant data, including back up tapes, e-mail archives, etc.  If you use a third-party to manage or maintain your document retention and/or email system, you need to contact them and ensure that routine destruction practices are stopped for the duration of the litigation. 

We hope you don’t ever face or contemplate employment-related litigation, but if you do, take the time to follow our tips to help avoid intentional and inadvertent document destruction. Preserving data to be produced and used in litigation can be frustrating, time consuming and expensive, but it is worth it to avoid a judge’s wrath for spoliation. 

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April 8, 2014

Keep Good Payroll Records to Defend Wage Claim

By Jason Ritchie 

An employee can prove a wage claim based on his or her own records if the employer does not keep records of the employee’s pay and hours.  Think about that for a moment.  Your company’s liability for unpaid wages may rest solely on an employee’s notes, emails, text messages, diary, check stubs, bank statements or memory.   If that doesn’t make you quake in your boots, perhaps this will – failure to pay wages at the time specified by Montana law can result in a penalty of up to 110% of the amount of unpaid wages owed.  The significance of keeping good payroll records was driven home by the Montana Supreme Court in a recent wage case where a roofing company struggled to defend a salesman’s claim for unpaid commissions because of its poor recordkeeping practices. America’s Best Contractors, Inc. v. Singh, 2014 MT 70. 

Unpaid Commissions Under Verbal Agreement Leads to Wage Claim 

Salesman Jasvinder Singh was hired by America’s Best Contractors, Inc. (ABC) in 2003 to sell roofing, siding and gutter repairs in numerous states.  Singh typically sold jobs for ABC from March through November and then returned to his home state where he serviced the contracts for the remainder of the year.  Singh was initially paid a 10% commission, but in 2009, ABC agreed to pay Singh 12% on his sales and an additional 1% on the sales by other ABC salespersons.  ABC did not have a written employment agreement with Singh.  In 2010, Singh relocated to Billings to begin selling ABC’s repair services in Montana. 

Singh and ABC’s President Dwane Drury, were close friends.  In 2010, Singh loaned Drury $25,000 so that Drury could go on hunting trips.  

Singh kept track of the money ABC paid to him by noting on the checks which ones were to repay the loans, which checks were for commissions from contracts sold in other states and which checks were for commissions for Montana contracts.  ABC, on the other hand, failed to keep accurate payroll and commission records.  By June 2011, Singh demanded to Drury that ABC pay him outstanding commissions and when it failed to do so, he quit.  A month later, Singh filed a claim with the Montana Department of Labor and Industry (DOLI) alleging he was owed unpaid commissions of approximately $41,000 from June 2010 to June 2011. 

Check Notations 

The DOLI’s Wage and Hour Unit investigated Singh’s wage claim and determined that ABC owed Singh unpaid commissions.  ABC appealed. DOLI’s Hearings Bureau held a hearing at which the Hearings Officer heard testimony from numerous witnesses, including Singh and Drury, and considered evidence presented by the parties.  The Hearings Officer issued a Final Agency Decision concluding that ABC owed Singh $39,080.43 in unpaid commissions plus a penalty of 55% of the unpaid wages, which amounted to an additional $21,494.23.  ABC appealed to the District Court which concluded that there was substantial evidence in the record to support the findings of the Hearings Officer.  ABC then appealed to the Montana Supreme Court. 

On appeal, ABC argued, among other things, that there was insufficient evidence to find that certain payments made by ABC to Singh were for collateral obligations rather than for Singh’s commissions earned in Montana.  The problem was that ABC could not produce evidence to show that certain payments made to Singh were in fact commission payments.  

The Supreme Court reviewed the evidence presented at the DOLI hearing and found that Drury admitted that he did not keep track of records on commissions paid and the records he did offer into evidence had all been edited by Drury after Singh had filed his wage claim.  Singh, on the other hand, produced sales reports, email exchanges, text messages, checks, other memoranda and his own testimony to establish the contracts he sold in Montana, the amount of commissions owed to him on those contracts and what he was paid.  He produced checks that included notations indicating whether they were for reimbursements, commissions earned in another state, commissions earned in Montana or for providing office services when Singh was in the Billings office.  With no evidence but Drury’s testimony to counter Singh’s evidence, the Supreme Court affirmed the Hearings Officer’s findings that ABC owed commissions to Singh. 

Good Recordkeeping of Hours and Pay is Essential 

Montana employers have a duty to maintain accurate records of hours worked by employees and the amount of pay provided for those hours.  Montana law also requires that employers pay employees earned wages, including commissions, within the time frames contained in the Wage Protection Act.  Failure to do so can result in penalties up to 110% of the unpaid wages owed.  In addition to the statutory recordkeeping obligations, employers need good payroll records in order to defend against employees’ wage claims.  As ABC found out, in the absence of payroll records from the employer, DOLI Hearings Officers will consider evidence provided by the employee to substantiate the employee’s wage claim, even if that evidence is in the form of notes, emails and text messages.  Spending the time and effort to set-up and maintain good payroll records is essential in managing your workforce and minimizing risks of wage claims.  Review your recordkeeping practices now and shore up any deficiencies so that you don’t find yourself at the mercy of an employee’s notes.

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November 25, 2013

Montana Supreme Court Stresses Right of Privacy in Employment Records

By Jason Ritchie 

Montana employees have a reasonable expectation of privacy in their personnel files, including identifying information such as job title and department. The Montana Supreme Court emphasized these privacy interests while examining whether the City of Billings was required to release copies of internal personnel investigative documents to the local newspaper following the investigation and discipline of five city employees. Billings Gazette v. City of Billings, 2013 MT 334.  The case serves as a good reminder to employers to properly safeguard employment records. 

City Employees Disciplined for Inappropriate Computer Use 

In early 2012, the City of Billings (City) discovered that five city employees may have been using their work computers to access pornographic websites during work hours.  Separate investigations were conducted, resulting in a five-day suspension for each of the five employees.  The City issued each of these employees a written corrective action determination which summarized information learned through the investigation and setting forth the resulting disciplinary action. 

Some months later, the Billings Gazette requested a list of all City employees who had been disciplined in the prior six months as well as copies of all records of disciplinary actions and other information related to the employees’ access to inappropriate websites.  The City provided some investigative documents but removed the names and other identifying information related to the five suspended employees and uninvolved third persons, citing privacy concerns. The newspaper went to court to obtain the documents with the identifying information included, arguing any privacy interest that the disciplined employees may have in the information did not clearly exceed the public’s right to know.  The district court reviewed the requested documents and ordered the City to turn over the corrective action forms and other documents with removal of only the identifying information related to third parties.  The City appealed the district court’s order to the Montana Supreme Court. 

Balancing Constitutional Right to Privacy with Public’s Right to Know 

The Montana Constitution provides the right of individual privacy but also establishes the public’s right to examine documents and deliberations of all public bodies and agencies.  These competing interests must be balanced to determine whether the individual privacy clearly exceeds the merits of public disclosure under the facts of each case.  

In this case, the Court held “that society would be willing to accept as reasonable a public employee’s expectation of privacy in his or her identity with respect to internal disciplinary matters when that employee is not in a position of public trust, and the misconduct resulting in the discipline was not a violation of a duty requiring a high level of public trust.”  Finding that the five disciplined employees were not elected officials or high level management and their inappropriate computer usage did not relate to the performance of a public trust function, the Court found that their expectation of privacy clearly outweighed the limited merits of public disclosure of their identifying information.  The Court ruled that the City did not have to turn over documents containing the employees’ identifying information. 

All Employers, Public and Private, Should Maintain Privacy of Personnel Records 

Although the Billings Gazette case dealt with a public employer (the City), the Court’s emphasis on employees’ privacy interests in their personnel records and their identifying information is relevant to private sector employers as well.  The Court noted that employment records regularly contain references to family, health or substance abuse problems, employer criticisms, test scores, background checks, military records and other types of information that employees reasonably expect to be confidential.  Employers should take care to safeguard personnel files and employment records at all times.  Access to personnel files should be limited and only those with a “need to know” should be permitted to view individual employment records.  In addition, medical information must be kept separately from the rest of an employee’s personnel file.  Take the time to review your recordkeeping policies and procedures to ensure that your organization does not violate your employees’ privacy interests.


Disclaimer: This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.


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April 23, 2013

NLRB Says Investigation Confidentiality Policy is Unlawful

By

Following its decision in Banner Health (despite the uncertainty caused by the Noel Canning decision), the National Labor Relations Board (NLRB) recently released an Advice Memorandum stating that  Verso Paper Corporation’s written policy calling for employees to maintain confidentiality in all workplace investigations violates Section 7 “concerted activity” rights under the National Labor Relations Act (NLRA).   Verso’s policy is unlawful, says the NLRB, “because it does not take into account the Employer’s burden to show in each particular situation that the Employer has a business justification for confidentiality that outweighs employees’ Section 7 rights.” 

Banner Health:  Blanket Confidentiality Violates NLRA Section 7

As reported in July 2012, the NLRB in Banner Health held that at the outset of each investigation employers must carefully balance whether a confidentiality requirement truly is warranted under the specific circumstances, or whether it would unfairly impinge employees Section 7 rights to discuss their working conditions.  Only where a need for confidentiality outweighs Section 7 rights can confidentiality be required. 

Unfortunately, the NLRB’s analysis in Banner Health at least implied that the only relevant factors weighing in favor of confidentiality are whether witnesses need protection, evidence is in danger of being destroyed, testimony is in danger of being fabricated, or there is a need to prevent a cover up.  The NLRB provided no guidance as to whether or not any additional factors, or what other factors, might be important in justifying a confidentiality instruction.  In particular, the NLRB in Banner Health did not discuss overarching factors which generally warrant confidentiality in most workplace investigations, including encouraging witness and complainant participation. 

Verso Paper’s Unlawful Confidentiality Policy

Verso Paper’s policy articulated the broadly-accepted bases for investigation confidentiality:

Verso has a compelling interest in protecting the integrity of its investigations. In every investigation, Verso has a strong desire to protect witnesses from harassment, intimidation and retaliation, to keep evidence from being destroyed, to ensure that testimony is not fabricated, and to prevent a cover-up. To assist Verso in achieving these objectives, we must maintain the investigation and our role in it in strict confidence. If we do not maintain such confidentiality, we may be subject to disciplinary action up to and including immediate termination.

The NLRB’s Advice Memo suggests that Verso’s blanket policy is unlawful because “specific facts” revealing a “legitimate and substantial” reason are necessary to justify confidentiality in each case: 

An employer may prohibit employees’ discussions during an investigation only if it demonstrates that it has a legitimate and substantial business justification that outweighs the Section 7 right.  In Banner Health, the Board held that an employer must show more than a generalized concern with protecting the integrity of its investigations. Rather, an employer must “determine whether in any give[n] investigation witnesses need[ed] protection, evidence [was] in danger of being destroyed, testimony [was] in danger of being fabricated, and there [was] a need to prevent a cover up.” 

*  *  * 

The Employer may not avoid this burden by asserting its need to protect the integrity of every investigation, but rather must establish this need in the context of a particular investigation that presents specific facts giving rise to a legitimate and substantial business justification for interference with the employees’ Section 7 right.  (Emphasis added.) 

It has also been reported that at least one EEOC office has taken the position that this type of blanket confidentiality policy violates Title VII’s right to oppose discrimination.  This appears to be contrary to the EEOC’s prior Guidance which provides:  “An employer should make clear to employees that it will protect the confidentiality of harassment allegations to the extent possible.”  Naturally, an employer cannot hope to maintain confidentiality if employees are not requested, or have no obligation, to do likewise. 

Significantly, the Advice Memo acknowledges that “the first two sentences of [Verso Paper’s] rule lawfully sets forth the Employee’s interest in protecting the integrity of its investigations.”  (Emphasis added.)  Given that the first two sentences of Verso Paper’s policy refers to its interests (not employees’), presumably the Advice Memo means the Employer’s interest, not the Employees’. 

The Advice Memo also suggests language to replace the offending language in the last two sentences of Verso Paper’s policy:

Verso may decide in some circumstances that in order to achieve these objectives, we must maintain the investigation and our role in it in strict confidence. If Verso reasonably imposes such a requirement and we do not maintain such confidentiality, we may be subject to disciplinary action up to and including immediate termination.  

This language provides little protection.  An employer’s general policy of investigation confidentiality also supports an employer’s complaint procedures by encouraging timely, legitimate complaints and fosters its ability to fulfill the duty to promptly investigate and address EEO and other legal issues.  It may come as a shock to complainants and other employees that confidentiality is no longer required in all investigations.  And, the mere possibility of confidentiality may be little consolation to complainants and other employees genuinely concerned about confidentiality and reluctant to participate.  But, that appears to be the protection the NLRB now sees fit to afford employees.   

Employers’ Difficult Position

Even though the Advice Memo acknowledges an employer’s “compelling” interests and “strong desire to protect witnesses,” this rule still puts employers in the difficult position of having to develop “specific facts” warranting a “substantial” need for confidentiality before the investigation begins and before it can require employee confidentiality.  At the outset of an investigation, however, it is not often clear in what direction a workplace investigation will lead; what might happen during (or after) an investigation to trigger confidentiality concerns or retaliation; or on what particular grounds confidentiality might truly be necessary in retrospect.  That is at least in part exactly why a blanket approach to investigation confidentiality is important, necessary and has been the preferred practice. 

What Now? 

While NLRB’s Advice Memo is not binding, and Banner Health could be invalidated depending on the outcome of the Noel Canning case, it strongly suggests that the NLRB intends to pursue this position, similar to its position regarding social media and Section 7 rights.  Thus, you may want to think about taking a number of steps to make a confidentiality instruction more likely to pass NLRB muster, including:

  • limit confidentiality instructions to EEO / legal issues or when investigation integrity is a particular concern;
  • specifically consider and document why confidentiality is necessary to a particular investigation;
  • ask complainants and witnesses to share and document concerns regarding confidentiality, intimidation, retaliation or other concerns that could warrant confidentiality;
  • revise written policies to reflect the NLRB “approved” language;
  • tailor confidentiality requirements to the specific subject matter of the investigation, and matters discussed in interviews and statements only during the investigation;
  • limit the confidentiality instruction to interviewed employees who have personal knowledge of events or other directly relevant information;
  • clarify that you cannot guarantee confidentiality;
  • clarify that the confidentiality restriction is not intended generally to prevent employees from addressing concerns with one another or with the employer; and
  • explain that the purpose of the confidentiality restriction is to:
    • preserve the integrity of the investigation process;
    • encourage employees to speak up when they have a problem and give them confidence that they may speak the truth;
    • uphold your anti-retaliation policy; and
    • allow you to conduct thorough and objective investigations which, in turn, allow you to effectively address employee complaints and concerns and resolve workplace conflict. 

Chris Chrisbens is the lead attorney for Holland & Hart’s Affirmative Action Planning and Office of Federal Contract Compliance Programs (OFCCP) service. He can be reached at fcchrisbens@hollandhart.com or 303-295-8193.


Disclaimer: This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.


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